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Founded in November, 1998 and headquartered in Shenzhen, Tencent is one of China's and the world's largest internet services companies, with subsidiaries and investments in media, entertainment, Internet and mobile communications, advertising, e-commerce and internet banking. It was listed on the Hong Kong Stock Exchange on June 16, 2004 and had a market capitalisation of more than HK$ 1 trilion as of the end of 2014.

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Mobile e-commerce battle heats up in China

Rivalry between Tencent and Alibaba intensifies after they roll out new products on the same day to tap the mainland's US$395 billion market

The battle between the mainland's internet giants Tencent and Alibaba for dominance in the country's rapidly expanding mobile e-commerce market is a fight that could be worth US$395 billion.

So the rollout of products in recent days by the two firms to stake a claim to territory each had previously thought they essentially owned is a sign of the turf wars to come.

If you have the users first, you have a significant advantage

Ricky Lai, Guotai Junan

"There is obviously some tension in the market, with two new products introduced on the same day," said Terry Chen, an analyst with brokerage CLSA. "Tencent's effort in monetisation is beginning, with games and payment services all started doing business. It is unknown how many people will take to using them and paying, so the growth is up to people's imagination."

Tencent launched on Monday WeChat 5.0, a new version of the world's fifth-most popular smartphone app, according to research firm GlobalWebIndex, with new monetisable features including a game centre, sticker shop, mobile payments and barcode scanning for e-commerce transactions.

On the same day, Alibaba unveiled a service that lets users trade on Sina's weibo microblog platform directly, a step into the social realm.

Chee Wee Gan, principal at consultancy firm AT Kearney, said the mainland e-commerce market was growing rapidly, with more and more businesses entering the business-to-consumer market, slowing the growth of the consumer-to-consumer market, Alibaba's home turf.

Consultancy McKinsey reckoned the country's e-commerce market would triple to US$395 billion from 2011 to 2015.

Tencent's QQ messenger had close to 800 million active accounts at the end of 2012, while WeChat has nearly 400 million users, of whom 195 million are monthly active users. WeChat had more than 70 million overseas users by last month.

Alibaba, meanwhile, has been working to slow WeChat's success. It has splashed out on an 18 per cent stake in Sina's Weibo and 28 per cent of AutoNavi, the mainland's top mapping system.

Even though Tencent has not carved out a clear path towards e-commerce, its sale of stickers and games is seen by analysts as a statement of intent.

Morgan Stanley has an "overweight" rating on Tencent, saying the WeChat update put the firm a step closer to mobile monetisation.

During the launch, Tencent put a mobile puzzle game, Tian Tian Ai Xiao Chu, on WeChat's new game centre and saw it jump to the top place on Apple's free app store for the mainland.

Analysts reckoned the sale of stickers and emoticons, at six yuan (HK$7.50) for each set, could be a key revenue driver. They estimated Line, a Japanese messenger app with similar functions, would get about a third of its 2013 revenue from sticker sales.

The new update also carries functions including a mobile payment system that lets users buy, for instance, movie tickets or coupons directly on the app through Tencent's third-party payment system Tenpay.

It also allows users to scan the barcodes of different products with their smartphones, and if the products are available online, users will be directed to different e-commerce websites to buy them.

Tencent's dominance in the social market gave it a lot of potential to take on Alibaba, the biggest player in e-commerce, Guotai Junan analyst Ricky Lai said.

"The competition is heating up, and you can see it go on intensifying," he said. "If you have the users first, you have a significant advantage because you don't have to spend as much effort grabbing their attention."

This article appeared in the South China Morning Post print edition as Mobile e-commerce battle heats up